The U.S. Federal Reserve decided to reduce its monthly asset purchases from US$45 billion to US$35 billion after a two-day policy meeting, repeating that interest rates would remain near zero "for a considerable time" after bond-buying ends, and hinting at a slightly faster pace for interest rate increases starting next year. Although the Fed lowered its forecast for U.S. economic growth, it expressed confidence that a recovery was largely on track. The Fed's "dovish" decision received a positive response from the market. It is believed that economic uncertainties were keeping the U.S. central bank from taking a more hawkish approach toward its monetary policy. Unemployment in the U.S. has dropped to 6.3 percent, but this is partly because many in the long-term jobless population are withdrawing from the job market entirely. The recovery of the U.S. housing market meanwhile remains slow, while the stock market boom is nearing the end of its tether. And as the upswing of the stock market over the past two years was clearly the result of low interest rates and a capital glut, the Fed cannot ignore the possible impact of interest rate increases on the stock and housing markets. Under these circumstances, the United States is expected to keep its monetary policy loose and interest rates low for at least another year. At the same time, the European Central Bank has introduced negative interest rates and is preparing to launch a new round of quantitative easing. With the world still awash in capital, emerging markets have seen a fresh influx of hot money. It is worth observing whether this will create a new wave of financial bubbles. All in all, it appears certain that the United States will raise its interest rates next year and phase out its QE policy sooner or later. In Taiwan, the stock market hit a six-year high last week thanks to purchases by foreign investors. In light of the expected changes in the global financial situation in the future and the possible bursting of China's housing bubble, Taiwanese investors must increase their risk awareness. (Editorial abstract -- June 23, 2014) (By Y.F. Low)